Refiners are the buyers of crude. Buy a bbl of CL and spend $ to convert it to products like gasoline, diesel, etc.

The business model requires the products' prices are more than price of crude and cost to make products

The last 3 weeks have been a problem

Crude has rallied more than products, seriously crimping refining economics

The premium of products price over crude is evaporating (before cost to refine the crude), thus disincentivizing refiners to process crude

Refiners respond to market signals quickly. They've adjusted runs in response to improving/deteriorating economics.

Today's DOE report shows refining runs hitting a new YTD low

Because crude prices are too high and product prices too low.

Refineries are responding to market signals and running less.

The result should be 1) lower crude prices (less refinery demand) and 2) higher product prices (less refinery supply)

Like we saw earlier in the year

What's interesting is that the domestic imbalance is spreading to an international imbalance.

To wit, US refiners have made hay in recent years exporting products to international markets that were short (LatAm, Asia)

Not so much today

Gasoline & distillate exports plummeting

With fewer options for products, refineries are building excess inventories. Gasoline has drawn a bit with lifting of quarantine restrictions, but distillates continue to build aggressively

Without a massive relief valve in the form of higher crude exports, NAM producers are beholden to the economics of the refining industry

Refining economics weaken, crude purchases decline. Prices weaken. With limited storage options, producers will again wrestle with shut-ins.

We've seen this movie before. A delicate balance btwn snail's pace demand recovery and prod returns

All in a low price environment